by Bill O’Grady

In January 2014, we first discussed the Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP).[1]  Both pacts have moved from obscure trade proposals to highly controversial political issues.  In this report, we will begin by discussing the nations involved.  We will examine overall details of the proposals, focusing on how they are different from traditional trade agreements.  From there, we will present an analysis of the controversy surrounding these proposals.  A look at the geopolitical aims of the agreements will follow and the likelihood that these treaties will be enacted.  As always, we will conclude with potential market ramifications.

The TTIP and the TPP
The TTIP will include the U.S. and all the nations of the EU.[2]  The TPP, which initially started with four nations, Brunei, Chile, New Zealand and Singapore, has expanded to 12 nations.[3]  Taiwan expressed interest in the TPP last year, but it is unclear whether the current configuration is comfortable with engaging in the age-old dispute over Chinese sovereignty.  South Korea has also decided to hold talks about joining the TPP group.  Conspicuous in its absence is China.

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[1] See WGR, The TTIP and the TPP, 1/27/2014.

[2] Austria, Belgium, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the U.K.

[3] Australia, Canada, Japan, Malaysia, Mexico, Peru, U.S., Vietnam, Chile, Brunei, Singapore and New Zealand.

by Bill O’Grady

Last week, in Part I of this study, we examined the four imperatives of American policy with an elaboration of each one.  This week, we will discuss why each is important.  We will examine why there has been a “drift” in American foreign policy since the end of the Cold War.  This drift has now reached a critical point as the U.S. appears to be backing away from its postwar trade policies and the geopolitical imperatives that avoided WWIII.  As always, we will conclude with the impact on financial and commodity markets.

The Importance of the Imperatives

To review, the U.S. had four geopolitical imperatives after WWII.  They were:

1. Deal with the Soviet Union, in particular, and the threat of global communism, in general
2. Maintain peace in Europe
3. Maintain stability in the Middle East
4. Maintain peace in the Far East

All four of these imperatives were critical to maintaining global peace.  Preventing the expansion of communism was “job one,” but removing the “German problem” from Europe was also very important as was keeping tensions manageable between China and Japan.  Although it was difficult to justify supporting authoritarian regimes in the Middle East on moral or ethical grounds, it was necessary to maintain stability.  Essentially, American foreign policy was designed to contain communism and freeze three potential conflict zones in Europe, Asia and the Middle East.

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by Bill O’Grady

In watching the political debates in the U.S. this election season, there appears to be a general misunderstanding of American foreign policy.  Although we have touched on this issue before, with the elections only about a month away, it seemed like a good time to review U.S. foreign policy since WWII.

This week, we will identify the four geopolitical imperatives of American policy, with an elaboration on each one.  We will note why each is important and why they were not fully articulated to the American public.  Most Americans have at least a vague understanding of the first imperative discussed below.  However, since the collapse of the Soviet Union, there has been a “drift” in policy that is due, in our opinion, to a lack of understanding about these imperatives.  This drift has now reached a critical point as the U.S. appears to be backing away from its postwar trade policies and the geopolitical imperatives that avoided WWIII.

In Part II, we will examine the importance of these imperatives, the rise of the populist backlash against the results of the policies that followed from meeting the imperatives, a summation of the issues and the role of the elections.  Next week, we will conclude with the impact on financial and commodity markets.

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by Bill O’Grady

The Transatlantic Trade and Investment Partnership (TTIP) is a trade and investment treaty being negotiated between the European Union (EU) and the U.S.  The Trans-Pacific Partnership (TPP) is a similar pact being negotiated between the U.S. and various Pacific Rim nations in both the eastern and western hemisphere.  If enacted, both these trade agreements will have significant geopolitical consequences.

In this report, we will begin by discussing the nations involved.  We will examine overall details of the proposals, focusing on how they are different from traditional trade agreements.  From there, an analysis of the controversy surrounding these proposals will be presented.  A look at the geopolitical aims of each agreement will follow and the likelihood that these treaties will be enacted.  As always, we will conclude with potential market ramifications.

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